How Are Restaurants Faring in the Wake of Minimum Wage Increases?

As a restaurant manager or owner, when you hear about raising the minimum wage, you wonder, what are you going to have to give up?

It’s simple math: Increase a restaurant’s costs, and something else will likely have to be cut: staff, operating hours, or maybe that organic butter lettuce. Or something else, like menu prices, might have to go up.

Over the last few weeks and months, minimum wage increases have now taken effect in several provinces and states. So, how are restaurateurs in two of those areas handling this new math? From making do and doing away with tipping to restaurant scheduling and raising prices, we see how kitchens are faring in this new era.

Alberta

The wages

Before: $9.20/hour (servers)

Now: $10.70/ hour (servers) /$11.20 (as of Oct 2015)

Future: Adjusted annually to the Consumer Price Index (CPI) with a goal of increasing the minimum wage to $15/hr (all workers) by 2018, and removing the liquor server differential by 2016.

“You can’t cut staff to save money, because they the quality of service will go down and your customer base could be hurt with poor service,” Beaton said. “The wage increase isn’t too drastic, so everything will be fine for now.”

Seattle

The wages

Before: $9.47

Now: $11 (As of April 1, 2015)

Future: $15/hour (in phases: small employers have seven years to pay all employees at least $15/hour, large employers have three years.)

The impact on the floor

Some restaurants have shut their doors. According to this Forbes article, the list of now-closed beloved Seattle eateries includes Grub, Little Uncle and Boat Street Café—all with idyllic locales, lauded menus and loyal patrons serving different markets.

Some restaurants are expected to increase menu prices by at least 4 per cent just from the wage hikes. (Apparently in Oakland, California, which recently saw similar wage increases, menu prices have gone up as much as 20 per cent. Source: San Francisco Chronicle).

Some restaurants are adopting all-inclusive (no tipping) menus. You can now find compulsory service charges at Walrus, Carpenter and Ivar’s seafood restaurants. Ivar’s president Bob C. Donegan said in a New York Times article, they chose to end tipping and raise prices (to the tune of 21 per cent) to manage the wage increases and balance “a fundamental inequity” in front and back-house wages.

In New York, where the National Restaurant Association is fighting an anticipated wage hike to $15/hour (from $8.75) by 2021, renowned New York restaurateur Danny Meyer (Union Square Hospitality Group) recently eliminated tipping at his restaurants and raised menu prices.

What else can restaurants do to help combat increasing minimum wages and forecast labor costs?

More than ever, restaurants need to have a picture of where their dollars are going, and they’re turning to labor control tools, some of which incorporate restaurant scheduling software, for help.